Camden National Corporation

Good day and welcome to Camden National Corporation's first quarter 2021 earnings conference call. My name is Garrett Kolar and I will be your operator for today's call. All participants will be in listen-only mode during today's presentation. Following the presentation, we will conduct a question and answer session. If you require operator assistance at any time during the call, press star then zero. Please note that this presentation contains forward-looking statements which will involve significant risks and uncertainties that may cause the actual results to vary materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in such forward-looking statements are described in the company's earnings press release, the company's 2020 annual report on Form 10-K, and other filings with the SEC. The company does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the forward-looking statements are made. Any references in today's presentation to non-GAAP financial measures are included to provide meaningful insights and are reconciled with GAAP in your press release. Today's presenters are Greg Dufour, President Chief Executive Officer, and Greg White, Executive Vice President, Chief Financial Officer. Please note that this event is being recorded. At this time, I would like to turn the conference over to Greg Dufour. Please go ahead, sir.

Thank you, Garrett, and welcome, everyone, to Canada National Corporation's first quarter 2021 earnings call. I'm pleased to share that earlier today, we announced record quarterly earnings for the first quarter of 2021 of $19.7 million. or $1.31 per diluted share. This continued the trend we saw in the latter half of 2020 of strong residential mortgage activity and PPP lending. We also released $2 million of pre-tax of provision reflecting our solid asset quality position and improving economic data. You may recall that we adopted the current expected credit losses of CECL model as of December 31st, 2020. Greg White will review our performance in a few moments, but I'd like to first provide some background and observations. Staying with the asset quality theme, we recorded approximately $10 million of non-performing assets on March 31, 2020, or just 0.2% of total assets. Loans passed due 30 to 89 days were just 0.05% of total loans on that date. After our provision released, Our allowance for credit losses on loans on March 31, 2021 was 1.11%, down from 1.18% at 12-31-2020, but higher than the 0.4% level we recorded on March 31, 2020, prior to the impact of the pandemic. Preliminary discussions around our market areas indicate a strong upcoming summer season. which we'll expect to benefit our local economies. Overall levels of people being vaccinated, along with the governor of Maine proactively outlining a plan for people visiting our state has caused a significant increase in reservations in the hospitality industry, which we expect will also drive other parts of the local economy. We continue to expect loan growth in the single digit range as loan pipelines are showing positive trends, and we also have the lever of holding additional residential mortgages if needed. I'd also like to note that since we last met, we were named the S&P Global List of Top Community Banks and named a Raymond James Community Cup Award recipient, which recognizes the top 10% of community banks. I'll now turn the discussion over to our Executive Vice President and Chief Financial Officer, Greg White.

Thank you, Greg, and good afternoon, everyone. As Greg Dufour mentioned, we had record net income of $19.7 million for the first quarter, an increase of $1.5 million compared to our previous quarterly earnings record in the fourth quarter last year of $18.3 million. Our diluted earnings per share was $1.31 compared to $1.22 in the prior quarter. Our return on tangible common equity was 18.47 percent for the quarter compared to 17.27 percent in the fourth quarter of last year. During the first quarter, our board approved a quarterly dividend of 36 cents, which is 9 percent higher than the 33 cents approved in the prior quarter. In both quarters, the payout ratio was 27 percent of earnings. Our capital position remains strong as evidenced by the 60 basis point increase in our total risk-based capital ratio to 16% at the end of the first quarter compared to 15.4% at the end of the prior quarter. Our tangible book value per share grew to $29.12 during the quarter compared to $28.96 at the end of the prior quarter. Our net interest margin decreased to 2.88% for the first quarter of this year from 3.06% the prior quarter. But adjusting for the impact of both PPP loan income and excess liquidity, our margin declined by eight basis points to 2.91% from 2.99% quarter over quarter on this basis. We continue to focus on driving down our cost of deposits and our overall cost of funds, both of which declined by four basis points compared to the prior quarter. Our efficiency ratio declined to 52 percent for the first quarter of this year from 54 percent in the fourth quarter of last year. Our core efficiency ratio fell to 51 percent from 53 percent during the same period. Total assets were 5.1 billion at March 31st of this year, an increase of $191 million or 4% since the end of last year. Total loans increased $17 million during the quarter, excluding PPP loans. Total loans at March 31st were down 17 million compared to the prior quarter. The commercial real estate portfolio grew by 2% during the quarter, partially offsetting the decrease across other core loan portfolios. As Greg mentioned earlier, we do have the option to hold more residential real estate loans, and that is something we continue to monitor. Total deposits grew by $206 million or 5%. since the fourth quarter of last year, while non-interest-bearing checking grew by 67 million or 9% during the same period. Asset quality remained strong with non-performing loans at 0.31% at the end of the quarter. I'm sorry, non-performing loans to total loans at 0.31% at the end of the quarter, down two basis points from 0.33 at the end of the fourth quarter of last year. Annualized net charge-offs for the quarter were three basis points of average loans in our ratio of past due loans 30 to 89 days to total loans fell by five basis points down from 10 basis points the prior quarter. Due to improving economic forecasts and continued strong asset quality, We did release $2 million of provision during the quarter, $1.9 million related to loans, and $0.1 million related to unfunded commitments. Our allowance for credit losses on loans to total loans ended the quarter at 1.11%, down from 1.18% at the end of the prior quarter. Our coverage ratio of ACL on loans to non-performing loans was 3.52 times at the end of the quarter, down slightly from 3.62 times as of December 31, 2020, but continues to be well above the level of 2.57 times at March 31, 2020, the start of the pandemic. This concludes our comments on the first quarter results. We will now open up the call for questions. Thank you.